# 62019CJ0049

JUDGMENT OF THE COURT (Fifth Chamber)

25 November 2020 (
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(Failure of a Member State to fulfil obligations – Electronic communications – Universal service and users’ rights relating to electronic communications networks and services – Directive 2002/22/EC – Networks and services – Article 13 – Financing of universal service obligations – Sharing mechanism – Principles of transparency, least market distortion, non-discrimination and proportionality)

In Case C‐49/19,

ACTION under Article 258 TFEU for failure to fulfil obligations, brought on 25 January 2019,

European Commission, represented initially by L. Nicolae, P. Costa de Oliveira and G. Braga da Cruz, and subsequently by L. Nicolae and G. Braga da Cruz, acting as Agents,

European Commission

applicant,

v

Portuguese Republic, represented by L. Inez Fernandes, P. Barros da Costa and J. Marques, acting as Agents, and by D. Silva Morais, advogado,

Portuguese Republic

defendant,

THE COURT (Fifth Chamber),

composed of E. Regan, President of the Chamber, M. Ilešič, E. Juhász (Rapporteur), C. Lycourgos and I. Jarukaitis, Judges,

Advocate General: M. Szpunar,

Registrar: M. Ferreira, Principal Administrator,

having regard to the written procedure and further to the hearing on 11 March 2020,

after hearing the Opinion of the Advocate General at the sitting on 28 May 2020,

gives the following

Judgment

Judgment

| 1 | By its application, the European Commission seeks a declaration from the Court that, by establishing an extraordinary contribution for the purpose of sharing the net cost of universal service obligations as from 2007, in accordance with Lei n.o 35/2012 procede à criação do fundo de compensação do serviço universal de comunicações eletrónicas previsto na Lei das Comunicações Eletrónicas, destinado ao financiamento dos custos líquidos decorrentes da prestação do serviço universal (Law No 35/2012 establishing a compensation fund for the universal service laid down by the Law on electronic communications, intended to finance the net costs arising from the provision of universal service) of 23 August 2012 (Diário da República, 1st Series, No 163, of 23 August 2012), amended and consolidated by Lei n.o 149/2015 (Law No 149/2015) of 10 September 2015 (Diário da República, 1st Series, No 177, of 10 September 2015) (‘Law No 35/2012’), the Portuguese Republic failed to fulfil its obligations under Article 13(3) of and Annex IV, Part B, to Directive 2002/22/EC of the European Parliament and of the Council of 7 March 2002 on universal service and users’ rights relating to electronic communications networks and services (‘the Universal Service Directive’) (OJ 2002 L 108, p. 51). |
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1

By its application, the European Commission seeks a declaration from the Court that, by establishing an extraordinary contribution for the purpose of sharing the net cost of universal service obligations as from 2007, in accordance with Lei n.o 35/2012 procede à criação do fundo de compensação do serviço universal de comunicações eletrónicas previsto na Lei das Comunicações Eletrónicas, destinado ao financiamento dos custos líquidos decorrentes da prestação do serviço universal (Law No 35/2012 establishing a compensation fund for the universal service laid down by the Law on electronic communications, intended to finance the net costs arising from the provision of universal service) of 23 August 2012 (Diário da República, 1st Series, No 163, of 23 August 2012), amended and consolidated by Lei n.o 149/2015 (Law No 149/2015) of 10 September 2015 (Diário da República, 1st Series, No 177, of 10 September 2015) (‘Law No 35/2012’), the Portuguese Republic failed to fulfil its obligations under Article 13(3) of and Annex IV, Part B, to Directive 2002/22/EC of the European Parliament and of the Council of 7 March 2002 on universal service and users’ rights relating to electronic communications networks and services (‘the Universal Service Directive’) (OJ 2002 L 108, p. 51).

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Diário da República

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Diário da República

Legal context

Legal context

European Union law

European Union law

| 2 | Recital 23 of Directive 2002/22 states:
  ‘The net cost of universal service obligations may be shared between all or certain specified classes of undertaking. Member States should ensure that the sharing mechanism respects the principles of transparency, least market distortion, non-discrimination and proportionality. Least market distortion means that contributions should be recovered in a way that as far as possible minimises the impact of the financial burden falling on end-users, for example by spreading contributions as widely as possible.’ |
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2

Recital 23 of Directive 2002/22 states:

‘The net cost of universal service obligations may be shared between all or certain specified classes of undertaking. Member States should ensure that the sharing mechanism respects the principles of transparency, least market distortion, non-discrimination and proportionality. Least market distortion means that contributions should be recovered in a way that as far as possible minimises the impact of the financial burden falling on end-users, for example by spreading contributions as widely as possible.’

| 3 | Article 8(2) of that directive provides:
  ‘When Member States designate undertakings in part or all of the national territory as having universal service obligations, they shall do so using an efficient, objective, transparent and non-discriminatory designation mechanism, whereby no undertaking is a priori excluded from being designated. Such designation methods shall ensure that universal service is provided in a cost-effective manner and may be used as a means of determining the net cost of the universal service obligation in accordance with Article 12.’ |
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3

Article 8(2) of that directive provides:

‘When Member States designate undertakings in part or all of the national territory as having universal service obligations, they shall do so using an efficient, objective, transparent and non-discriminatory designation mechanism, whereby no undertaking is a priori excluded from being designated. Such designation methods shall ensure that universal service is provided in a cost-effective manner and may be used as a means of determining the net cost of the universal service obligation in accordance with Article 12.’

| 4 | Article 12 of the directive, entitled ‘Costing of universal service obligations’, provides:
  ‘1.   Where national regulatory authorities consider that the provision of universal service as set out in Articles 3 to 10 may represent an unfair burden on undertakings designated to provide universal service, they shall calculate the net costs of its provision.
  For that purpose, national regulatory authorities shall:





  (a) | calculate the net cost of the universal service obligation, taking into account any market benefit which accrues to an undertaking designated to provide universal service, in accordance with Annex IV, Part A; or |
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4

Article 12 of the directive, entitled ‘Costing of universal service obligations’, provides:

‘1.   Where national regulatory authorities consider that the provision of universal service as set out in Articles 3 to 10 may represent an unfair burden on undertakings designated to provide universal service, they shall calculate the net costs of its provision.

For that purpose, national regulatory authorities shall:

(a)

calculate the net cost of the universal service obligation, taking into account any market benefit which accrues to an undertaking designated to provide universal service, in accordance with Annex IV, Part A; or

| (b) | make use of the net costs of providing universal service identified by a designation mechanism in accordance with Article 8(2). |
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(b)

make use of the net costs of providing universal service identified by a designation mechanism in accordance with Article 8(2).

2.   The accounts and/or other information serving as the basis for the calculation of the net cost of universal service obligations under paragraph 1(a) shall be audited or verified by the national regulatory authority or a body independent of the relevant parties and approved by the national regulatory authority. The results of the cost calculation and the conclusions of the audit shall be publicly available.’

| 5 | Article 13 of Directive 2002/22, entitled ‘Financing of universal service obligations’, is worded as follows:
  ‘1.   Where, on the basis of the net cost calculation referred to in Article 12, national regulatory authorities find that an undertaking is subject to an unfair burden, Member States shall, upon request from a designated undertaking, decide:





  (a) | to introduce a mechanism to compensate that undertaking for the determined net costs under transparent conditions from public funds; and/or |
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5

Article 13 of Directive 2002/22, entitled ‘Financing of universal service obligations’, is worded as follows:

‘1.   Where, on the basis of the net cost calculation referred to in Article 12, national regulatory authorities find that an undertaking is subject to an unfair burden, Member States shall, upon request from a designated undertaking, decide:

(a)

to introduce a mechanism to compensate that undertaking for the determined net costs under transparent conditions from public funds; and/or

| (b) | to share the net cost of universal service obligations between providers of electronic communications networks and services. |
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(b)

to share the net cost of universal service obligations between providers of electronic communications networks and services.

2.   Where the net cost is shared under paragraph 1(b), Member States shall establish a sharing mechanism administered by the national regulatory authority or a body independent from the beneficiaries under the supervision of the national regulatory authority. Only the net cost, as determined in accordance with Article 12, of the obligations laid down in Articles 3 to 10 may be financed.

3.   A sharing mechanism shall respect the principles of transparency, least market distortion, non-discrimination and proportionality, in accordance with the principles of Annex IV, Part B. Member States may choose not to require contributions from undertakings whose national turnover is less than a set limit.

4.   Any charges related to the sharing of the cost of universal service obligations shall be unbundled and identified separately for each undertaking. Such charges shall not be imposed or collected from undertakings that are not providing services in the territory of the Member State that has established the sharing mechanism.’

| 6 | Article 14 of Directive 2002/22, entitled ‘Transparency’, states:
  ‘1.   Where a mechanism for sharing the net cost of universal service obligations as referred to in Article 13 is established, national regulatory authorities shall ensure that the principles for cost sharing, and details of the mechanism used, are publicly available.
  2.   Subject to Community and national rules on business confidentiality, national regulatory authorities shall ensure that an annual report is published giving the calculated cost of universal service obligations, identifying the contributions made by all the undertakings involved, and identifying any market benefits, that may have accrued to the undertaking(s) designated to provide universal service, where a fund is actually in place and working.’ |
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6

Article 14 of Directive 2002/22, entitled ‘Transparency’, states:

‘1.   Where a mechanism for sharing the net cost of universal service obligations as referred to in Article 13 is established, national regulatory authorities shall ensure that the principles for cost sharing, and details of the mechanism used, are publicly available.

2.   Subject to Community and national rules on business confidentiality, national regulatory authorities shall ensure that an annual report is published giving the calculated cost of universal service obligations, identifying the contributions made by all the undertakings involved, and identifying any market benefits, that may have accrued to the undertaking(s) designated to provide universal service, where a fund is actually in place and working.’

| 7 | Annex IV to that directive, entitled ‘Calculating the net cost, if any, of universal service obligations and establishing any recovery or sharing mechanism in accordance with Articles 12 and 13’, contains, inter alia, a Part B headed ‘Recovery of any net costs of universal service obligations’, which is worded as follows:
  ‘The recovery or financing of any net costs of universal service obligations requires designated undertakings with universal service obligations to be compensated for the services they provide under non-commercial conditions. Because such a compensation involves financial transfers, Member States are to ensure that these are undertaken in an objective, transparent, non-discriminatory and proportionate manner. This means that the transfers result in the least distortion to competition and to user demand.
  In accordance with Article 13(3), a sharing mechanism based on a fund should use a transparent and neutral means for collecting contributions that avoids the danger of a double imposition of contributions falling on both outputs and inputs of undertakings.
  The independent body administering the fund is to be responsible for collecting contributions from undertakings which are assessed as liable to contribute to the net cost of universal service obligations in the Member State and is to oversee the transfer of sums due and/or administrative payments to the undertakings entitled to receive payments from the fund.’ |
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7

Annex IV to that directive, entitled ‘Calculating the net cost, if any, of universal service obligations and establishing any recovery or sharing mechanism in accordance with Articles 12 and 13’, contains, inter alia, a Part B headed ‘Recovery of any net costs of universal service obligations’, which is worded as follows:

‘The recovery or financing of any net costs of universal service obligations requires designated undertakings with universal service obligations to be compensated for the services they provide under non-commercial conditions. Because such a compensation involves financial transfers, Member States are to ensure that these are undertaken in an objective, transparent, non-discriminatory and proportionate manner. This means that the transfers result in the least distortion to competition and to user demand.

In accordance with Article 13(3), a sharing mechanism based on a fund should use a transparent and neutral means for collecting contributions that avoids the danger of a double imposition of contributions falling on both outputs and inputs of undertakings.

The independent body administering the fund is to be responsible for collecting contributions from undertakings which are assessed as liable to contribute to the net cost of universal service obligations in the Member State and is to oversee the transfer of sums due and/or administrative payments to the undertakings entitled to receive payments from the fund.’

Portuguese law

Portuguese law

Law No 5/2004

Law No 5/2004

| 8 | Lei n.o 5/2004 das Comunicações Electrónicas (Law No 5/2004 on electronic communications) of 10 February 2004 (Diário da República I, Series I-A, No 34, of 10 February 2004), as last amended by Decreto-Lei n.o 92/2017 (Decree-Law No 92/2017) of 31 June 2017 (Diário da República, 1st Series, No 146, of 31 July 2017) (‘Law No 5/2004’), transposed Directive 2002/22 into Portuguese law. |
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8

Lei n.o 5/2004 das Comunicações Electrónicas (Law No 5/2004 on electronic communications) of 10 February 2004 (Diário da República I, Series I-A, No 34, of 10 February 2004), as last amended by Decreto-Lei n.o 92/2017 (Decree-Law No 92/2017) of 31 June 2017 (Diário da República, 1st Series, No 146, of 31 July 2017) (‘Law No 5/2004’), transposed Directive 2002/22 into Portuguese law.

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Diário da República

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| 9 | Article 97 of Law No 5/2004 provides:
  ‘1.   After determining the existence of net costs relating to universal service which the national regulatory authority has deemed to be unreasonable, the Government shall, upon request from the respective providers, establish appropriate compensation using one or both of the following mechanisms:





  (a) | recovery via public funds; |
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9

Article 97 of Law No 5/2004 provides:

‘1.   After determining the existence of net costs relating to universal service which the national regulatory authority has deemed to be unreasonable, the Government shall, upon request from the respective providers, establish appropriate compensation using one or both of the following mechanisms:

(a)

recovery via public funds;

| (b) | cost sharing between other undertakings providing publicly available electronic communications networks and services in national territory. |
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(b)

cost sharing between other undertakings providing publicly available electronic communications networks and services in national territory.

2.   Where the mechanism provided for in point (b) of the preceding paragraph is applied, a compensation fund shall be established, to which undertakings providing publicly available electronic communications networks and services shall contribute. That fund shall be administered by the national regulatory authority or by another independent body designated by the Government and under the supervision of the national regulatory authority.

3.   The criteria for sharing the net cost of universal service between the undertakings required to contribute shall be laid down by the Government, with due regard to the principles of transparency, least market distortion, non-discrimination and proportionality.

...’

Law No 35/2012

Law No 35/2012

| 10 | Law No 35/2012 established a compensation fund for the universal service of electronic communications in order to finance the net costs of complying with universal service obligations and to ensure that those costs are shared between the undertakings required to contribute to them (‘the compensation fund’). |
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10

Law No 35/2012 established a compensation fund for the universal service of electronic communications in order to finance the net costs of complying with universal service obligations and to ensure that those costs are shared between the undertakings required to contribute to them (‘the compensation fund’).

| 11 | Article 6 of Law No 35/2012 provides:
  ‘The compensation fund shall be used to finance the net costs of universal service determined in the public procurement procedures referred to in Article 99(3) of Law No 5/2004 of 10 February 2004, as amended and consolidated by Law No 51/2011 of 13 September 2011, which the [Autoridade Nacional de Comunicações (Anacom) (National Communications Authority, Portugal)] has deemed to be unreasonable, in accordance with Article 95(1)(b) and Article 97 of that law, and to finance the net costs of universal service provided for in Chapter V.’ |
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11

Article 6 of Law No 35/2012 provides:

‘The compensation fund shall be used to finance the net costs of universal service determined in the public procurement procedures referred to in Article 99(3) of Law No 5/2004 of 10 February 2004, as amended and consolidated by Law No 51/2011 of 13 September 2011, which the [Autoridade Nacional de Comunicações (Anacom) (National Communications Authority, Portugal)] has deemed to be unreasonable, in accordance with Article 95(1)(b) and Article 97 of that law, and to finance the net costs of universal service provided for in Chapter V.’

| 12 | Article 17 of Law No 35/2012, entitled ‘Financing of net costs for the period prior to designation in public procurement procedures’, provides, in paragraphs 1 and 2:
  ‘1.   The compensation fund established by this law shall also permit compensation for the net costs of universal service incurred prior to commencement of the universal service provision by the service provider(s) designated in accordance with Article 99(3) of Law No 5/2004 of 10 February 2004, as amended and consolidated by Law No 51/2011 of 13 September 2011, subject to the following cumulative conditions:





  (a) | the existence of net costs must be determined following an audit and those costs must be deemed to be unreasonable by [Anacom] under Article 95(1)(a), Article 95(2) and Articles 96 and 97 of Law No 5/2004 of 10 February 2004, as amended and consolidated by Law No 51/2011 of 13 September 2011; |
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12

Article 17 of Law No 35/2012, entitled ‘Financing of net costs for the period prior to designation in public procurement procedures’, provides, in paragraphs 1 and 2:

‘1.   The compensation fund established by this law shall also permit compensation for the net costs of universal service incurred prior to commencement of the universal service provision by the service provider(s) designated in accordance with Article 99(3) of Law No 5/2004 of 10 February 2004, as amended and consolidated by Law No 51/2011 of 13 September 2011, subject to the following cumulative conditions:

(a)

the existence of net costs must be determined following an audit and those costs must be deemed to be unreasonable by [Anacom] under Article 95(1)(a), Article 95(2) and Articles 96 and 97 of Law No 5/2004 of 10 February 2004, as amended and consolidated by Law No 51/2011 of 13 September 2011;

| (b) | the universal service provider must apply to the Government for compensation for the costs referred to in the preceding paragraph. |
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(b)

the universal service provider must apply to the Government for compensation for the costs referred to in the preceding paragraph.

2.   The net costs to be compensated in respect of the period prior to designation following a public procurement procedure shall correspond to the amount approved by [Anacom], in accordance with subparagraph (a) of the preceding paragraph.’

| 13 | Article 18(1) of Law No 35/2012 provides:
  ‘1.   Undertakings providing public communications networks and/or publicly available electronic communications services in national territory shall be required to pay an extraordinary contribution to the compensation fund for each of the financial years 2013, 2014 and 2015. That extraordinary contribution shall be intended solely to finance the net costs referred to in the preceding article approved by [Anacom] during those years.
  ...
  5.   The extraordinary contribution referred to in paragraph 1 shall represent 3% of the eligible annual turnover of each entity, subject to the maximum thresholds laid down in the following paragraphs.
  6.   The extraordinary contribution to be paid by each undertaking may not under any circumstances exceed the figure resulting from the sharing of net costs referred to in Article 17(2) between the undertakings required to contribute, in proportion to their eligible turnover.
  ...’ |
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13

Article 18(1) of Law No 35/2012 provides:

‘1.   Undertakings providing public communications networks and/or publicly available electronic communications services in national territory shall be required to pay an extraordinary contribution to the compensation fund for each of the financial years 2013, 2014 and 2015. That extraordinary contribution shall be intended solely to finance the net costs referred to in the preceding article approved by [Anacom] during those years.

...

5.   The extraordinary contribution referred to in paragraph 1 shall represent 3% of the eligible annual turnover of each entity, subject to the maximum thresholds laid down in the following paragraphs.

6.   The extraordinary contribution to be paid by each undertaking may not under any circumstances exceed the figure resulting from the sharing of net costs referred to in Article 17(2) between the undertakings required to contribute, in proportion to their eligible turnover.

...’

| 14 | Under Article 20 of Law No 35/2012, the extraordinary contribution for each financial year must be paid within five years. |
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14

Under Article 20 of Law No 35/2012, the extraordinary contribution for each financial year must be paid within five years.

Pre-litigation procedure

Pre-litigation procedure

| 15 | On 13 December 2012, the Commission sent a letter to the Portuguese Republic through the EU Pilot system requesting clarification regarding the compatibility of the compensation fund with Article 13 of and Annex IV, Part B, to Directive 2002/22, particularly concerning compensation for the net costs borne by the universal service provider PT Comunicações in the past and during a period prior to its new designation as universal service provider following a public procurement procedure. |
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15

On 13 December 2012, the Commission sent a letter to the Portuguese Republic through the EU Pilot system requesting clarification regarding the compatibility of the compensation fund with Article 13 of and Annex IV, Part B, to Directive 2002/22, particularly concerning compensation for the net costs borne by the universal service provider PT Comunicações in the past and during a period prior to its new designation as universal service provider following a public procurement procedure.

| 16 | The Portuguese authorities replied to that letter on 21 February 2013. Additional information was provided at a meeting with the Commission’s services on 23 October 2014 and, subsequently, by letter of 5 December 2014. |
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16

The Portuguese authorities replied to that letter on 21 February 2013. Additional information was provided at a meeting with the Commission’s services on 23 October 2014 and, subsequently, by letter of 5 December 2014.

| 17 | Since the Commission was not satisfied with those replies, it sent a letter of formal notice to the Portuguese Republic on 27 February 2015. In its reply of 29 April 2015, the Portuguese Republic maintained that Portuguese law and its implementation were compatible with the requirements of Directive 2002/22, including as regards observance of the principles of transparency, least market distortion, non-discrimination and proportionality. |
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17

Since the Commission was not satisfied with those replies, it sent a letter of formal notice to the Portuguese Republic on 27 February 2015. In its reply of 29 April 2015, the Portuguese Republic maintained that Portuguese law and its implementation were compatible with the requirements of Directive 2002/22, including as regards observance of the principles of transparency, least market distortion, non-discrimination and proportionality.

| 18 | After considering that reply, the Commission sent the Portuguese Republic a reasoned opinion by letter of 29 April 2016 in which it requested that Member State to take the measures necessary to comply with the reasoned opinion within two months of its notification. |
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18

After considering that reply, the Commission sent the Portuguese Republic a reasoned opinion by letter of 29 April 2016 in which it requested that Member State to take the measures necessary to comply with the reasoned opinion within two months of its notification.

| 19 | The Portuguese authorities replied to that reasoned opinion by letter of 1 July 2016. Following a meeting with the Commission’s services on 7 September 2016, the Portuguese authorities, by letter of 14 October 2016, supplemented their reply and sent additional information to the Commission. |
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19

The Portuguese authorities replied to that reasoned opinion by letter of 1 July 2016. Following a meeting with the Commission’s services on 7 September 2016, the Portuguese authorities, by letter of 14 October 2016, supplemented their reply and sent additional information to the Commission.

| 20 | Two further meetings took place between the Commission and the Portuguese authorities in January and July 2017. During the latter meeting, the parties considered several courses of action with a view to resolving the dispute between them. Subsequently, the Commission requested that a proposed course of action be submitted to it, together with a deadline for implementation. In the two letters subsequently sent to the Commission on 14 March 2017 and 12 September 2018, the Portuguese authorities, first, proposed a further meeting and, second, stated that they considered it wise to await the outcome of proceedings brought by a number of operators before the national courts concerning the issues raised in the present case. |
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20

Two further meetings took place between the Commission and the Portuguese authorities in January and July 2017. During the latter meeting, the parties considered several courses of action with a view to resolving the dispute between them. Subsequently, the Commission requested that a proposed course of action be submitted to it, together with a deadline for implementation. In the two letters subsequently sent to the Commission on 14 March 2017 and 12 September 2018, the Portuguese authorities, first, proposed a further meeting and, second, stated that they considered it wise to await the outcome of proceedings brought by a number of operators before the national courts concerning the issues raised in the present case.

| 21 | It was against that background that the Commission brought the present action. |
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21

It was against that background that the Commission brought the present action.

The action

The action

| 22 | The Commission complains that the Portuguese Republic’s extraordinary contribution to the compensation fund, referred to in Article 18 of Law No 35/2012 (‘the extraordinary contribution’), fails to comply with the requirements deriving from Article 13(3) of and Annex IV, Part B, to Directive 2002/22. |
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22

The Commission complains that the Portuguese Republic’s extraordinary contribution to the compensation fund, referred to in Article 18 of Law No 35/2012 (‘the extraordinary contribution’), fails to comply with the requirements deriving from Article 13(3) of and Annex IV, Part B, to Directive 2002/22.

| 23 | The Commission states that, in accordance with the provisions mentioned in the preceding paragraph, if a Member State opts for the mechanism for sharing the net costs of providing universal service between providers of communications networks and services, that mechanism must comply with the principles of transparency, least market distortion, non-discrimination and proportionality. |
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23

The Commission states that, in accordance with the provisions mentioned in the preceding paragraph, if a Member State opts for the mechanism for sharing the net costs of providing universal service between providers of communications networks and services, that mechanism must comply with the principles of transparency, least market distortion, non-discrimination and proportionality.

Scope of the action

Scope of the action

| 24 | It must be observed, in the first place, that Article 13 of Directive 2002/22 lays down detailed rules for the financing of universal service obligations. |
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24

It must be observed, in the first place, that Article 13 of Directive 2002/22 lays down detailed rules for the financing of universal service obligations.

| 25 | Thus, it follows from Article 13(1) of that directive, read in conjunction with Article 12(1) thereof, that the financing mechanism can operate only for the benefit of an undertaking designated in accordance with Article 8(2) of that directive. |
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25

Thus, it follows from Article 13(1) of that directive, read in conjunction with Article 12(1) thereof, that the financing mechanism can operate only for the benefit of an undertaking designated in accordance with Article 8(2) of that directive.

| 26 | However, it is common ground that Article 13(1) of Directive 2002/22 is not the object of the present action; what is at issue here is whether the extraordinary contribution established by the Portuguese Republic with a view to compensating for the net cost of providing universal service is compatible with Article 13(3) of that directive. |
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26

However, it is common ground that Article 13(1) of Directive 2002/22 is not the object of the present action; what is at issue here is whether the extraordinary contribution established by the Portuguese Republic with a view to compensating for the net cost of providing universal service is compatible with Article 13(3) of that directive.

| 27 | In the second place, with respect to the origin of the extraordinary contribution, the Commission asserts that, in 2011, Anacom adopted decisions on the definition of unfair burden arising from the provision of universal service and on the methodology to be used to determine the net costs of that service. In accordance with those decisions, the provision of universal service constitutes an unfair burden on the provider concerned when the market share in terms of revenue from telephone services supplied by the universal service provider at a fixed location, calculated on an annual basis, falls below 80% and the calculated cost of universal service is equal to or greater than EUR 2.5 million. |
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27

In the second place, with respect to the origin of the extraordinary contribution, the Commission asserts that, in 2011, Anacom adopted decisions on the definition of unfair burden arising from the provision of universal service and on the methodology to be used to determine the net costs of that service. In accordance with those decisions, the provision of universal service constitutes an unfair burden on the provider concerned when the market share in terms of revenue from telephone services supplied by the universal service provider at a fixed location, calculated on an annual basis, falls below 80% and the calculated cost of universal service is equal to or greater than EUR 2.5 million.

| 28 | It adds that, since the market share of PT Comunicações, the former incumbent operator, was below 80% only from 2007 onwards, it was decided, first, not to pay any compensation in respect of 2001 to 2006 and, second, in respect of the period after 1 January 2007 and until the universal service provider(s) designated by a public procurement procedure began providing that service, to use the methodology for calculating the net costs of universal service drawn up by Anacom. |
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28

It adds that, since the market share of PT Comunicações, the former incumbent operator, was below 80% only from 2007 onwards, it was decided, first, not to pay any compensation in respect of 2001 to 2006 and, second, in respect of the period after 1 January 2007 and until the universal service provider(s) designated by a public procurement procedure began providing that service, to use the methodology for calculating the net costs of universal service drawn up by Anacom.

| 29 | The Commission in no way questions the methodology for calculating the costs of universal service used by the Portuguese authorities or the amounts to be compensated pursuant to that methodology. |
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29

The Commission in no way questions the methodology for calculating the costs of universal service used by the Portuguese authorities or the amounts to be compensated pursuant to that methodology.

| 30 | However, it takes the view that the mechanism for sharing the costs of providing universal service established by the Portuguese Republic infringes Article 13 of Directive 2002/22 and Annex IV, Part B, thereto, since it requires a financial contribution from providers of electronic communications networks and services in respect of previous years. Thus, the net cost of universal service for the financial years 2007 to 2009, 2010 and 2011, and 2012 and 2013 was audited and the final amount was approved by Anacom in 2013, 2014 and 2015, respectively. In addition, by three decisions of 29 January 2015, 28 January 2016 and 26 January 2017, Anacom identified the undertakings required to contribute to the compensation fund and fixed the amount of extraordinary contributions payable by them. The contributions for 2013, 2014 and 2015 were intended to compensate for the net costs in respect of the financial years 2007 to 2009, 2010 and 2011, and 2012 and 2013, respectively. |
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30

However, it takes the view that the mechanism for sharing the costs of providing universal service established by the Portuguese Republic infringes Article 13 of Directive 2002/22 and Annex IV, Part B, thereto, since it requires a financial contribution from providers of electronic communications networks and services in respect of previous years. Thus, the net cost of universal service for the financial years 2007 to 2009, 2010 and 2011, and 2012 and 2013 was audited and the final amount was approved by Anacom in 2013, 2014 and 2015, respectively. In addition, by three decisions of 29 January 2015, 28 January 2016 and 26 January 2017, Anacom identified the undertakings required to contribute to the compensation fund and fixed the amount of extraordinary contributions payable by them. The contributions for 2013, 2014 and 2015 were intended to compensate for the net costs in respect of the financial years 2007 to 2009, 2010 and 2011, and 2012 and 2013, respectively.

| 31 | In those circumstances, it must be found that the Commission’s action raises only the question whether the Portuguese rules establishing the mechanism for sharing the costs of providing universal service comply with the principles to be observed by all mechanisms for sharing the net costs of universal service obligations put in place pursuant to Article 13(1)(b) of Directive 2002/22, in order to comply with the requirements flowing from Article 13(3) of and Annex IV, Part B, thereto. |
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31

In those circumstances, it must be found that the Commission’s action raises only the question whether the Portuguese rules establishing the mechanism for sharing the costs of providing universal service comply with the principles to be observed by all mechanisms for sharing the net costs of universal service obligations put in place pursuant to Article 13(1)(b) of Directive 2002/22, in order to comply with the requirements flowing from Article 13(3) of and Annex IV, Part B, thereto.

The principle of transparency

The principle of transparency

Arguments of the parties

Arguments of the parties

| 32 | The Commission submits that the Portuguese Republic breached the principle of transparency. It argues that the way in which the net costs of universal service were to be compensated was not clear from the Portuguese rules in force before the adoption of Law No 35/2012. Likewise, those rules did not impose any obligation on operators in the sector concerned to contribute to a compensation fund intended to cover the net costs of universal service. It cannot be inferred from the existence of an abstract technical possibility of having recourse to a compensation fund that the holders of rights and obligations under Directive 2002/22 were in a position to know the extent of their obligations, in breach of the principle of legal certainty, for which the principle of transparency also serves as a safeguard. |
| --- | --- |

32

The Commission submits that the Portuguese Republic breached the principle of transparency. It argues that the way in which the net costs of universal service were to be compensated was not clear from the Portuguese rules in force before the adoption of Law No 35/2012. Likewise, those rules did not impose any obligation on operators in the sector concerned to contribute to a compensation fund intended to cover the net costs of universal service. It cannot be inferred from the existence of an abstract technical possibility of having recourse to a compensation fund that the holders of rights and obligations under Directive 2002/22 were in a position to know the extent of their obligations, in breach of the principle of legal certainty, for which the principle of transparency also serves as a safeguard.

| 33 | The principle of transparency does not merely entail an obligation to publish or to make available the measures taken and actions carried out by the EU institutions and the Member States, like the obligation laid down in Article 14 of Directive 2002/22, compliance with which by the Portuguese rules is not called into question by the Commission. As is apparent from the judgment of 6 December 2001, Commission v France (C‐146/00, EU:C:2001:668, paragraphs 48 and 49), concerning the financing of universal service under Directive 97/33/EC of the European Parliament and of the Council of 30 June 1997 on interconnection in Telecommunications with regard to ensuring universal service and interoperability through application of the principles of Open Network Provision (ONP) (OJ 1997 L 199, p. 32), if a mechanism for sharing the net cost of universal service obligations is to be consistent with the principle of transparency laid down in Article 5(1) of that directive, it is important that the values chosen are set in accordance with objective criteria and that like is compared with like so as to ensure transparency; that will enable operators to calculate their probable costs and income. Any factor that makes that calculation more difficult is likely to discourage them from entering the market. |
| --- | --- |

33

The principle of transparency does not merely entail an obligation to publish or to make available the measures taken and actions carried out by the EU institutions and the Member States, like the obligation laid down in Article 14 of Directive 2002/22, compliance with which by the Portuguese rules is not called into question by the Commission. As is apparent from the judgment of 6 December 2001, Commission v France (C‐146/00, EU:C:2001:668, paragraphs 48 and 49), concerning the financing of universal service under Directive 97/33/EC of the European Parliament and of the Council of 30 June 1997 on interconnection in Telecommunications with regard to ensuring universal service and interoperability through application of the principles of Open Network Provision (ONP) (OJ 1997 L 199, p. 32), if a mechanism for sharing the net cost of universal service obligations is to be consistent with the principle of transparency laid down in Article 5(1) of that directive, it is important that the values chosen are set in accordance with objective criteria and that like is compared with like so as to ensure transparency; that will enable operators to calculate their probable costs and income. Any factor that makes that calculation more difficult is likely to discourage them from entering the market.

| 34 | Similarly, in the field of public procurement, the requirements of clarity and precision form an integral part of the principle of transparency in an award procedure. The principle of legal certainty, for its part, requires rules of law which may adversely affect individuals to be clear, precise and predictable in their effects. That requirement of legal certainty must be observed all the more strictly where the rules concerned are liable to entail financial consequences. |
| --- | --- |

34

Similarly, in the field of public procurement, the requirements of clarity and precision form an integral part of the principle of transparency in an award procedure. The principle of legal certainty, for its part, requires rules of law which may adversely affect individuals to be clear, precise and predictable in their effects. That requirement of legal certainty must be observed all the more strictly where the rules concerned are liable to entail financial consequences.

| 35 | In the Commission’s view, there is a clear link between the principle of transparency and the principle of legal certainty, the scope of which goes beyond the protection of legitimate expectations and which requires that the law be clear and predictable, a requirement that applies not only to EU legislation but also to national provisions transposing a directive. |
| --- | --- |

35

In the Commission’s view, there is a clear link between the principle of transparency and the principle of legal certainty, the scope of which goes beyond the protection of legitimate expectations and which requires that the law be clear and predictable, a requirement that applies not only to EU legislation but also to national provisions transposing a directive.

| 36 | In its defence, the Portuguese Republic disputes the Commission’s interpretation of the principle of transparency, which it claims is based neither on the letter nor on the spirit of Directive 2002/22, nor on the case-law of the EU Courts. The Portuguese Republic contends that that principle – which entails the possibility of examining the decisions of public bodies, in particular through the statement of reasons for those decisions and their adoption in open and publicly accessible procedures – refers to the objectivity of the criteria and the comparability of the factors taken into account to calculate the net cost of universal service obligations, the predictability of the costs being one consequence of those factors. |
| --- | --- |

36

In its defence, the Portuguese Republic disputes the Commission’s interpretation of the principle of transparency, which it claims is based neither on the letter nor on the spirit of Directive 2002/22, nor on the case-law of the EU Courts. The Portuguese Republic contends that that principle – which entails the possibility of examining the decisions of public bodies, in particular through the statement of reasons for those decisions and their adoption in open and publicly accessible procedures – refers to the objectivity of the criteria and the comparability of the factors taken into account to calculate the net cost of universal service obligations, the predictability of the costs being one consequence of those factors.

| 37 | Furthermore, according to the Portuguese Republic, the principle of legal certainty should not be confused with the principle of transparency. The arguments put forward by the Commission are concerned above all with the principles of legal certainty and the protection of legitimate expectations, since those arguments essentially allege that the extraordinary contribution has retroactive effect, which is incompatible with the principle of legal certainty. The consequence of those arguments is that the universal service provider cannot be compensated for net costs already incurred, as audited and approved by Anacom, even though national rules provide for the recovery of those costs. |
| --- | --- |

37

Furthermore, according to the Portuguese Republic, the principle of legal certainty should not be confused with the principle of transparency. The arguments put forward by the Commission are concerned above all with the principles of legal certainty and the protection of legitimate expectations, since those arguments essentially allege that the extraordinary contribution has retroactive effect, which is incompatible with the principle of legal certainty. The consequence of those arguments is that the universal service provider cannot be compensated for net costs already incurred, as audited and approved by Anacom, even though national rules provide for the recovery of those costs.

The Court’s assessment

The Court’s assessment

| 38 | First of all, it must be observed that under Article 13(3) of and Annex IV, Part B, to Directive 2002/22, the sharing mechanism established, as the case may be, by the Member States pursuant to Article 13(1)(b) of that directive must comply with the principle of transparency, among others. That principle, which is a corollary of the principle of equality, requires, like the principle of legal certainty, that all the conditions and terms of such a sharing mechanism be made known by means of rules that are sufficiently accessible, clear, precise, unequivocal and predictable in their application to make it possible for all reasonably informed operators exercising ordinary care to understand their exact significance and to avoid any risk of arbitrariness (see, to that effect, judgments of 19 December 2018, Stanley International Betting and Stanleybet Malta, C‐375/17, EU:C:2018:1026, paragraph 57, and of 3 October 2019, Irgita, C‐285/18, EU:C:2019:829, paragraph 55). Specifically, those parameters must be set in accordance with objective criteria, as is moreover confirmed by Annex IV, Part B, to Directive 2002/22, and like must be compared with like so as to ensure transparency; this will enable operators to calculate their probable costs and income (see, by analogy, judgment of 6 December 2001, Commission v France, C‐146/00, EU:C:2001:668, paragraphs 48 and 49). |
| --- | --- |

38

First of all, it must be observed that under Article 13(3) of and Annex IV, Part B, to Directive 2002/22, the sharing mechanism established, as the case may be, by the Member States pursuant to Article 13(1)(b) of that directive must comply with the principle of transparency, among others. That principle, which is a corollary of the principle of equality, requires, like the principle of legal certainty, that all the conditions and terms of such a sharing mechanism be made known by means of rules that are sufficiently accessible, clear, precise, unequivocal and predictable in their application to make it possible for all reasonably informed operators exercising ordinary care to understand their exact significance and to avoid any risk of arbitrariness (see, to that effect, judgments of 19 December 2018, Stanley International Betting and Stanleybet Malta, C‐375/17, EU:C:2018:1026, paragraph 57, and of 3 October 2019, Irgita, C‐285/18, EU:C:2019:829, paragraph 55). Specifically, those parameters must be set in accordance with objective criteria, as is moreover confirmed by Annex IV, Part B, to Directive 2002/22, and like must be compared with like so as to ensure transparency; this will enable operators to calculate their probable costs and income (see, by analogy, judgment of 6 December 2001, Commission v France, C‐146/00, EU:C:2001:668, paragraphs 48 and 49).

| 39 | It follows that the obligations for Member States flowing from such a principle differ from those specifically imposed by Article 14 of Directive 2002/22, so that compliance with the latter obligations is not sufficient for a finding that the principle of transparency, referred to in Article 13 of that directive, has not been breached. |
| --- | --- |

39

It follows that the obligations for Member States flowing from such a principle differ from those specifically imposed by Article 14 of Directive 2002/22, so that compliance with the latter obligations is not sufficient for a finding that the principle of transparency, referred to in Article 13 of that directive, has not been breached.

| 40 | In that regard, it must be observed that notwithstanding the relationship between the principle of transparency and the principle of legal certainty, those principles are nevertheless independent of each other. |
| --- | --- |

40

In that regard, it must be observed that notwithstanding the relationship between the principle of transparency and the principle of legal certainty, those principles are nevertheless independent of each other.

| 41 | Consequently, inasmuch as – according to the Commission’s own assertions – the extraordinary contribution was introduced by Law No 35/2012, the Portuguese Republic cannot be criticised for having failed to comply with the principle of transparency simply because operators were unable to predict, before the date of adoption of that law, the extent of their obligations under the extraordinary contribution established by it. The principle of transparency cannot go so far as to require that the persons liable to pay a contribution must be aware of its content even before its introduction. |
| --- | --- |

41

Consequently, inasmuch as – according to the Commission’s own assertions – the extraordinary contribution was introduced by Law No 35/2012, the Portuguese Republic cannot be criticised for having failed to comply with the principle of transparency simply because operators were unable to predict, before the date of adoption of that law, the extent of their obligations under the extraordinary contribution established by it. The principle of transparency cannot go so far as to require that the persons liable to pay a contribution must be aware of its content even before its introduction.

| 42 | It should be added that, as stated in paragraph 30 of the present judgment, the Commission did not claim that the methodology for calculating the extraordinary contribution was based on criteria that were not accessible, clear, precise, objective or predictable or that were ambiguous. |
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42

It should be added that, as stated in paragraph 30 of the present judgment, the Commission did not claim that the methodology for calculating the extraordinary contribution was based on criteria that were not accessible, clear, precise, objective or predictable or that were ambiguous.

| 43 | In must also be observed that between 2007 and 2013, when Directive 2002/22 was fully applicable, telecommunications operators could not expect the Portuguese Republic not to make use of the possibility open to it under Article 13(1)(b) of that directive. |
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43

In must also be observed that between 2007 and 2013, when Directive 2002/22 was fully applicable, telecommunications operators could not expect the Portuguese Republic not to make use of the possibility open to it under Article 13(1)(b) of that directive.

| 44 | Lastly, in so far as the Commission states, in its reply, that the extraordinary contribution imposes on operators the obligation to compensate for costs incurred during a period prior to the adoption of Law No 35/2012, it must be held that, as is apparent from the Commission’s pleadings and as it confirmed at the hearing, the basis of the present action is circumscribed, in that regard, to a breach of the principle of transparency. Accordingly, suffice it to point out that that circumstance cannot, on any view, constitute a breach of the principle of transparency. |
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44

Lastly, in so far as the Commission states, in its reply, that the extraordinary contribution imposes on operators the obligation to compensate for costs incurred during a period prior to the adoption of Law No 35/2012, it must be held that, as is apparent from the Commission’s pleadings and as it confirmed at the hearing, the basis of the present action is circumscribed, in that regard, to a breach of the principle of transparency. Accordingly, suffice it to point out that that circumstance cannot, on any view, constitute a breach of the principle of transparency.

| 45 | Therefore, the complaint alleging that the introduction of the extraordinary contribution by the Portuguese Republic is vitiated by a breach of the principle of transparency referred to in Article 13(3) of and Annex IV, Part B, to Directive 2002/22 must be dismissed. |
| --- | --- |

45

Therefore, the complaint alleging that the introduction of the extraordinary contribution by the Portuguese Republic is vitiated by a breach of the principle of transparency referred to in Article 13(3) of and Annex IV, Part B, to Directive 2002/22 must be dismissed.

The principles of least market distortion and proportionality

The principles of least market distortion and proportionality

Arguments of the parties

Arguments of the parties

| 46 | The Commission considers, in the first place, that the principle of least market distortion has been breached because the financial burden arising from the extraordinary contribution was significant and unforeseeable for operators and each contribution covered several years, with the result that that allocation method imposed a heavier burden than an annual contribution taking account of the net costs for the year in question. That observation is valid even if, in practice, the figure of 3% of annual turnover was not always reached. |
| --- | --- |

46

The Commission considers, in the first place, that the principle of least market distortion has been breached because the financial burden arising from the extraordinary contribution was significant and unforeseeable for operators and each contribution covered several years, with the result that that allocation method imposed a heavier burden than an annual contribution taking account of the net costs for the year in question. That observation is valid even if, in practice, the figure of 3% of annual turnover was not always reached.

| 47 | In its defence, the Portuguese Republic contends that that principle relates above all to the way in which the costs incurred by universal service providers are shared in order to minimise the financial impact on end-users. In the present case, in the light of the specific rules for collecting the extraordinary contribution, the actual impact of that contribution on the operators concerned was slight. |
| --- | --- |

47

In its defence, the Portuguese Republic contends that that principle relates above all to the way in which the costs incurred by universal service providers are shared in order to minimise the financial impact on end-users. In the present case, in the light of the specific rules for collecting the extraordinary contribution, the actual impact of that contribution on the operators concerned was slight.

| 48 | The Commission submits, in the second place, that the principle of proportionality has been breached as the undertakings required to contribute to compensation for the net costs borne by the undertakings designated following a public procurement procedure were, at the same time, under an obligation to pay the extraordinary contribution. That obligation thus entailed a ‘double contribution’ or, at the very least, an increase in the financial burden to be borne by the former. Furthermore, according to the Commission, the amounts of the extraordinary contribution were significant in comparison with, for example, the amounts of the contribution for the same period in Spain. |
| --- | --- |

48

The Commission submits, in the second place, that the principle of proportionality has been breached as the undertakings required to contribute to compensation for the net costs borne by the undertakings designated following a public procurement procedure were, at the same time, under an obligation to pay the extraordinary contribution. That obligation thus entailed a ‘double contribution’ or, at the very least, an increase in the financial burden to be borne by the former. Furthermore, according to the Commission, the amounts of the extraordinary contribution were significant in comparison with, for example, the amounts of the contribution for the same period in Spain.

| 49 | The Portuguese Republic asserts that the extraordinary contribution fully complied with the principle of proportionality since it was designed in such a way as to spread the net costs of universal service deemed to be unreasonable between different operators on the basis of their turnover, while ensuring that smaller undertakings which did not yet have a consolidated market position were exempted from the contribution by setting a minimum turnover threshold for its collection. |
| --- | --- |

49

The Portuguese Republic asserts that the extraordinary contribution fully complied with the principle of proportionality since it was designed in such a way as to spread the net costs of universal service deemed to be unreasonable between different operators on the basis of their turnover, while ensuring that smaller undertakings which did not yet have a consolidated market position were exempted from the contribution by setting a minimum turnover threshold for its collection.

The Court’s assessment

The Court’s assessment

| 50 | It is apparent from Article 13(1) of Directive 2002/22 that Member States are required to introduce one of the two compensation mechanisms set out in that provision where the national regulatory authorities have found, as in the present case, that the undertaking responsible for universal service is subject to an unfair burden, on the basis of the net cost calculation referred to in Article 12 of that directive, and the undertaking in question has made a request to that effect. |
| --- | --- |

50

It is apparent from Article 13(1) of Directive 2002/22 that Member States are required to introduce one of the two compensation mechanisms set out in that provision where the national regulatory authorities have found, as in the present case, that the undertaking responsible for universal service is subject to an unfair burden, on the basis of the net cost calculation referred to in Article 12 of that directive, and the undertaking in question has made a request to that effect.

| 51 | It is important to note that the principle of least market distortion is described in recital 23 of Directive 2002/22 as meaning that contributions should be ‘recovered in a way that as far as possible minimises the impact of the financial burden falling on end-users, for example by spreading contributions as widely as possible’. Thus, in the light of that description and as the Portuguese Republic pointed out, that principle is concerned above all with the way in which the burden borne by universal service providers is shared. Annex IV, Part B, to that directive further states in that regard that those contributions should ‘result in the least distortion to competition and to user demand’. |
| --- | --- |

51

It is important to note that the principle of least market distortion is described in recital 23 of Directive 2002/22 as meaning that contributions should be ‘recovered in a way that as far as possible minimises the impact of the financial burden falling on end-users, for example by spreading contributions as widely as possible’. Thus, in the light of that description and as the Portuguese Republic pointed out, that principle is concerned above all with the way in which the burden borne by universal service providers is shared. Annex IV, Part B, to that directive further states in that regard that those contributions should ‘result in the least distortion to competition and to user demand’.

| 52 | In the present case, Article 18 of Law No 35/2012, which lays down specific rules for collecting the extraordinary contribution, provides, in paragraph 1, that that contribution is intended solely to finance the net costs of universal service in respect of 2007 to 2013 which have been audited by Anacom and which Anacom has deemed to constitute an unreasonable burden for the universal service provider. Paragraph 5 of that article goes on to state that the amount of that contribution may be up to 3% of the eligible annual turnover of each undertaking concerned. Under paragraph 6 thereof, that amount may not under any circumstances exceed the figure resulting from the sharing – in proportion to the turnover of the undertakings liable to pay – of the net costs incurred by the universal service provider which Anacom has deemed to be unreasonable. |
| --- | --- |

52

In the present case, Article 18 of Law No 35/2012, which lays down specific rules for collecting the extraordinary contribution, provides, in paragraph 1, that that contribution is intended solely to finance the net costs of universal service in respect of 2007 to 2013 which have been audited by Anacom and which Anacom has deemed to constitute an unreasonable burden for the universal service provider. Paragraph 5 of that article goes on to state that the amount of that contribution may be up to 3% of the eligible annual turnover of each undertaking concerned. Under paragraph 6 thereof, that amount may not under any circumstances exceed the figure resulting from the sharing – in proportion to the turnover of the undertakings liable to pay – of the net costs incurred by the universal service provider which Anacom has deemed to be unreasonable.

| 53 | It should also be borne in mind that the Commission does not dispute either the methodology for calculating the net costs applied by Anacom, or the existence of an unfair burden on the service provider between 2007 and 2013, or the conclusion which that authority reached in the decisions relating to 2013, 2014 and 2015. |
| --- | --- |

53

It should also be borne in mind that the Commission does not dispute either the methodology for calculating the net costs applied by Anacom, or the existence of an unfair burden on the service provider between 2007 and 2013, or the conclusion which that authority reached in the decisions relating to 2013, 2014 and 2015.

| 54 | As regards the Commission’s argument that the alleged unpredictability of the costs for operators arising from the extraordinary contribution breaches the principle of least market distortion, it should be noted that the Commission has failed to demonstrate that that unpredictability alone, assuming it to be established, would lead to a breach of that principle. Moreover, as stated in paragraph 41 of the present judgment, the Commission has not proven that the parameters for calculating the extraordinary contribution prevented operators from predicting, with a reasonable degree of certainty, the amount of that contribution for each of the years 2013, 2014 and 2015. |
| --- | --- |

54

As regards the Commission’s argument that the alleged unpredictability of the costs for operators arising from the extraordinary contribution breaches the principle of least market distortion, it should be noted that the Commission has failed to demonstrate that that unpredictability alone, assuming it to be established, would lead to a breach of that principle. Moreover, as stated in paragraph 41 of the present judgment, the Commission has not proven that the parameters for calculating the extraordinary contribution prevented operators from predicting, with a reasonable degree of certainty, the amount of that contribution for each of the years 2013, 2014 and 2015.

| 55 | The mere fact that the amount of that contribution was shown to be significant also does not demonstrate that it was, in itself, disproportionate or breached the principle of least market distortion. Since the contribution corresponded to the net costs incurred by the universal service provider and those costs were found to constitute an unfair burden on the undertaking responsible for providing universal service, the Member State concerned was required to compensate for that unfair burden through one of the two mechanisms set out in Article 13(1) of Directive 2002/22 and that contribution amounted to appropriate compensation which was limited to what was necessary to achieve that objective. |
| --- | --- |

55

The mere fact that the amount of that contribution was shown to be significant also does not demonstrate that it was, in itself, disproportionate or breached the principle of least market distortion. Since the contribution corresponded to the net costs incurred by the universal service provider and those costs were found to constitute an unfair burden on the undertaking responsible for providing universal service, the Member State concerned was required to compensate for that unfair burden through one of the two mechanisms set out in Article 13(1) of Directive 2002/22 and that contribution amounted to appropriate compensation which was limited to what was necessary to achieve that objective.

| 56 | Furthermore, as the Portuguese Republic argued, payment facilities were available to the undertakings liable for the extraordinary contribution since, as is apparent from Article 20(4) of Law No 35/2012, payment of the contribution could be spread over five years for each financial year. That option thus afforded operators the possibility of adjusting the financial burden borne by them in paying that contribution, such as to minimise its impact as far as possible. |
| --- | --- |

56

Furthermore, as the Portuguese Republic argued, payment facilities were available to the undertakings liable for the extraordinary contribution since, as is apparent from Article 20(4) of Law No 35/2012, payment of the contribution could be spread over five years for each financial year. That option thus afforded operators the possibility of adjusting the financial burden borne by them in paying that contribution, such as to minimise its impact as far as possible.

| 57 | Furthermore, contrary to what the Commission claims, the fact that the basis of assessment for the extraordinary contribution was operators’ turnover for the years following the entry into force of that contribution, rather than their turnover for the years during which universal service was provided by PT Comunicações, does not breach the principle of proportionality and the principle of least market distortion, given that the financial burden thus imposed on operators was proportionate to the market share held by them precisely when that burden was imposed. |
| --- | --- |

57

Furthermore, contrary to what the Commission claims, the fact that the basis of assessment for the extraordinary contribution was operators’ turnover for the years following the entry into force of that contribution, rather than their turnover for the years during which universal service was provided by PT Comunicações, does not breach the principle of proportionality and the principle of least market distortion, given that the financial burden thus imposed on operators was proportionate to the market share held by them precisely when that burden was imposed.

| 58 | It should be added, as the Portuguese Republic pointed out, that the relevant national rules ensured that the extraordinary contribution was shared between a large number of operators, as recital 23 of Directive 2002/22 requested Member States to do. |
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58

It should be added, as the Portuguese Republic pointed out, that the relevant national rules ensured that the extraordinary contribution was shared between a large number of operators, as recital 23 of Directive 2002/22 requested Member States to do.

| 59 | The Commission further submits that the collection of the extraordinary contribution resulted in the contributing undertakings being subject to a ‘double contribution’, in that those undertakings were required, from 2013 onwards, both to contribute to financing the costs associated with universal service for the period following the public procurement procedure and to pay the extraordinary contribution in respect of costs borne by PT Comunicações prior to the public procurement procedure. |
| --- | --- |

59

The Commission further submits that the collection of the extraordinary contribution resulted in the contributing undertakings being subject to a ‘double contribution’, in that those undertakings were required, from 2013 onwards, both to contribute to financing the costs associated with universal service for the period following the public procurement procedure and to pay the extraordinary contribution in respect of costs borne by PT Comunicações prior to the public procurement procedure.

| 60 | It is true that the Portuguese Republic’s decision to collect, by way of the extraordinary contribution, compensation for the net costs incurred by the universal service provider prior to the public procurement procedure led to an increase in the burden borne by the undertakings concerned in the financial years 2013, 2014 and 2015. |
| --- | --- |

60

It is true that the Portuguese Republic’s decision to collect, by way of the extraordinary contribution, compensation for the net costs incurred by the universal service provider prior to the public procurement procedure led to an increase in the burden borne by the undertakings concerned in the financial years 2013, 2014 and 2015.

| 61 | However, since the extraordinary contribution was intended to compensate for the net costs of universal service incurred by the universal service provider during periods prior to the public procurement procedure in respect of which no compensation had yet been paid, that contribution must in fact be regarded as a deferred contribution, so that the Commission is not justified in claiming the existence of a ‘double contribution’. |
| --- | --- |

61

However, since the extraordinary contribution was intended to compensate for the net costs of universal service incurred by the universal service provider during periods prior to the public procurement procedure in respect of which no compensation had yet been paid, that contribution must in fact be regarded as a deferred contribution, so that the Commission is not justified in claiming the existence of a ‘double contribution’.

| 62 | The mere fact that the Portuguese Republic’s decision necessarily resulted in an increase in the financial burden borne by the undertakings concerned as regards certain financial years cannot in itself, in the light of the considerations set out in paragraphs 54 to 57 of the present judgment, constitute a breach of the principle of proportionality. |
| --- | --- |

62

The mere fact that the Portuguese Republic’s decision necessarily resulted in an increase in the financial burden borne by the undertakings concerned as regards certain financial years cannot in itself, in the light of the considerations set out in paragraphs 54 to 57 of the present judgment, constitute a breach of the principle of proportionality.

| 63 | Accordingly, the Commission has not established to the requisite legal standard that the extraordinary contribution breached the principle of least market distortion and the principle of proportionality, referred to in Article 13(3) of and Annex IV, Part B, to Directive 2002/22. |
| --- | --- |

63

Accordingly, the Commission has not established to the requisite legal standard that the extraordinary contribution breached the principle of least market distortion and the principle of proportionality, referred to in Article 13(3) of and Annex IV, Part B, to Directive 2002/22.

The principle of non-discrimination

The principle of non-discrimination

Arguments of the parties

Arguments of the parties

| 64 | The Commission submits that the rationale for compensating for net costs is to restore competitive fairness between the undertakings concerned, so that, in the present case, compliance with the principle of non-discrimination required that only the turnover of operators present on the telecommunications market in Portugal when the net costs were incurred should be taken into account. The extraordinary contribution applied to all operators present on the market between 2013 and 2015, including those which were absent from it or present in another form between 2007 and 2013. More specifically, the Commission states that significant changes took place in the telecommunications market in Portugal, particularly as a result of concentrations and conversions of undertakings. For those reasons, the Commission argues that the undertakings concerned, in their new form, were discriminated against because they were required to pay a contribution calculated on the basis of their turnover in respect of years that were not the years to which the net costs related. |
| --- | --- |

64

The Commission submits that the rationale for compensating for net costs is to restore competitive fairness between the undertakings concerned, so that, in the present case, compliance with the principle of non-discrimination required that only the turnover of operators present on the telecommunications market in Portugal when the net costs were incurred should be taken into account. The extraordinary contribution applied to all operators present on the market between 2013 and 2015, including those which were absent from it or present in another form between 2007 and 2013. More specifically, the Commission states that significant changes took place in the telecommunications market in Portugal, particularly as a result of concentrations and conversions of undertakings. For those reasons, the Commission argues that the undertakings concerned, in their new form, were discriminated against because they were required to pay a contribution calculated on the basis of their turnover in respect of years that were not the years to which the net costs related.

| 65 | The Portuguese Republic contends that the principle of non-discrimination was observed. Concerning the development of the national telecommunications market in Portugal, it submits that the restructuring operations which took place in that market between 2007 and 2014 involved intragroup and intergroup restructurings, the only effect of which was to alter the designation and internal structure of the operators concerned. Thus, the operators were economically identical between 2007 and 2014 owing to the existence of a single economic unit and/or relationships of interdependence reflecting the existence of a power of control. |
| --- | --- |

65

The Portuguese Republic contends that the principle of non-discrimination was observed. Concerning the development of the national telecommunications market in Portugal, it submits that the restructuring operations which took place in that market between 2007 and 2014 involved intragroup and intergroup restructurings, the only effect of which was to alter the designation and internal structure of the operators concerned. Thus, the operators were economically identical between 2007 and 2014 owing to the existence of a single economic unit and/or relationships of interdependence reflecting the existence of a power of control.

The Court’s assessment

The Court’s assessment

| 66 | According to the Court’s settled case-law, discrimination involves the application of different rules to comparable situations or the application of the same rule to different situations (judgments of 13 February 1996, Gillespie and Others, C‐342/93, EU:C:1996:46, paragraph 16, and of 12 December 2019, Instituto Nacional de la Seguridad Social (Pension supplement for mothers), C‐450/18, EU:C:2019:1075, paragraph 42). |
| --- | --- |

66

According to the Court’s settled case-law, discrimination involves the application of different rules to comparable situations or the application of the same rule to different situations (judgments of 13 February 1996, Gillespie and Others, C‐342/93, EU:C:1996:46, paragraph 16, and of 12 December 2019, Instituto Nacional de la Seguridad Social (Pension supplement for mothers), C‐450/18, EU:C:2019:1075, paragraph 42).

| 67 | It is true that the operators present on the market when the costs which the extraordinary contribution was to compensate for were incurred and the operators not present on that market received comparable treatment, since both groups of operators were liable to pay that contribution. |
| --- | --- |

67

It is true that the operators present on the market when the costs which the extraordinary contribution was to compensate for were incurred and the operators not present on that market received comparable treatment, since both groups of operators were liable to pay that contribution.

| 68 | However, the Commission has not established to the requisite legal standard that those two groups of operators were in situations so different that the application of the same rule to them should be regarded as discrimination. |
| --- | --- |

68

However, the Commission has not established to the requisite legal standard that those two groups of operators were in situations so different that the application of the same rule to them should be regarded as discrimination.

| 69 | Moreover, although restructuring operations took place in the telecommunications market in Portugal during the period in question, the fact remains that – as the Advocate General made clear in point 85 of his Opinion and as is apparent in particular from the Portuguese Republic’s defence and from the oral argument at the hearing – those restructurings were essentially of an intragroup and intergroup nature, since the operators which the Commission describes as new operators were, in actual fact, the result of mergers between operators already present on that market. |
| --- | --- |

69

Moreover, although restructuring operations took place in the telecommunications market in Portugal during the period in question, the fact remains that – as the Advocate General made clear in point 85 of his Opinion and as is apparent in particular from the Portuguese Republic’s defence and from the oral argument at the hearing – those restructurings were essentially of an intragroup and intergroup nature, since the operators which the Commission describes as new operators were, in actual fact, the result of mergers between operators already present on that market.

| 70 | Against that background, the occurrence of a restructuring or merger operation did not, in itself, have the effect, as regards collection of the extraordinary contribution, of placing operators liable for that contribution resulting from such operations in a situation not comparable to that of operators liable for that contribution whose legal structure remained unchanged. |
| --- | --- |

70

Against that background, the occurrence of a restructuring or merger operation did not, in itself, have the effect, as regards collection of the extraordinary contribution, of placing operators liable for that contribution resulting from such operations in a situation not comparable to that of operators liable for that contribution whose legal structure remained unchanged.

| 71 | Therefore, as stated in paragraph 68 of the present judgment, the development of the telecommunications market in Portugal is not such as to affect the comparability of the legal situation of those undertakings. |
| --- | --- |

71

Therefore, as stated in paragraph 68 of the present judgment, the development of the telecommunications market in Portugal is not such as to affect the comparability of the legal situation of those undertakings.

| 72 | In those circumstances, by implementing the extraordinary contribution, the Portuguese Republic did not breach the principle of non-discrimination, as laid down in Article 13(3) of and Annex IV, Part B, to Directive 2002/22. |
| --- | --- |

72

In those circumstances, by implementing the extraordinary contribution, the Portuguese Republic did not breach the principle of non-discrimination, as laid down in Article 13(3) of and Annex IV, Part B, to Directive 2002/22.

| 73 | Since none of the principles set out in Article 13(3) of and Annex IV, Part B, to Directive 2002/22 has been breached, the Commission’s action must be dismissed. |
| --- | --- |

73

Since none of the principles set out in Article 13(3) of and Annex IV, Part B, to Directive 2002/22 has been breached, the Commission’s action must be dismissed.

Costs

Costs

| 74 | Under Article 138(1) of the Rules of Procedure of the Court of Justice, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Portuguese Republic has applied for costs to be awarded against the Commission and the latter has been unsuccessful, the Commission must be ordered to pay the costs. |
| --- | --- |

74

Under Article 138(1) of the Rules of Procedure of the Court of Justice, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Portuguese Republic has applied for costs to be awarded against the Commission and the latter has been unsuccessful, the Commission must be ordered to pay the costs.

| | On those grounds, the Court (Fifth Chamber) hereby: |
| --- | --- |

On those grounds, the Court (Fifth Chamber) hereby:

| | 1. | Dismisses the action. |
| --- | --- | --- |

1.

1.

Dismisses the action.

Dismisses the action.

| | 2. | Orders the European Commission to pay the costs. |
| --- | --- | --- |

2.

2.

Orders the European Commission to pay the costs.

Orders the European Commission to pay the costs.

| | [Signatures] |
| --- | --- |

[Signatures]

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(
  *1
  )	Language of the case: Portuguese.

*1